How to Leverage Coffee All Day Long

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How to Leverage Coffee All Day Long

By Bob Phillips - 12/05/2015

If there is one constant in the ever-changing convenience store landscape, it’s that coffee is king. Coffee, together with cigarettes and petroleum, comprise a winning trifecta at c-stores, attracting customers and, with good planning and effective promotion, providing solid profits.

Traditional hot coffee (including flavored) accounts for more than 74 percent of all hot dispensed beverage sales in c-stores, according to the latest Convenience Store News Foodservice Study. This month, the CSNews How To Crew of experts offer guidance on how to make your coffee sales sizzle — particularly during the winter months that are upon us.

“Coffee is the most important foodservice item in most convenience stores,” advised How To Crew retailer Chad Prast, senior category manager of fresh foods and dispensed beverages for Murphy USA Inc. Prast noted that a unique coffee your customers can identify as specific to your store/chain can be a key driver in other consumer spending patterns. “A good cup of coffee can help drive fresh food sales in the form of combo meals,” he said.

“Coffee is not only critical, it is foundational,” added How To Crew retailer Jack Cushman, director of foodservice for Corner Store operator CST Brands Inc. “Without doing [coffee] right, the food simply doesn’t follow in terms of customer appreciation and lift.”

“If you can sell an average of 150 cups of coffee per store per day, with the majority of those cups coming in the a.m., you have a great chance for add-on food sales to 100–120 customers,” explained industry consultant and How To Crew panelist Paul Pierce. That translates into roughly 20–30 breakfast sandwiches and/or 30–40 doughnuts. “All of that is a great base to begin developing your food program,” he said.

During the vital morning daypart, coffee generates more than 20 percent of in-store sales and is involved in 33 percent of all in-store transactions, according to How To Crew member David Bishop, managing partner of Barrington, Ill.-based consulting firm Balvor LLC.

“Although retailers are trying to leverage the coffee bar during other dayparts by introducing other types of products — iced coffee, for instance — hot coffee’s primary role is to drive in-store traffic during morning drive time,” Bishop said.

How To Crew member Mathew Mandeltort, vice president of foodservice strategy at Naperville, Ill.-based convenience distributor Eby-Brown, even goes so far as to say “a good coffee program is absolutely essential to the success of a foodservice program.”

Research shows coffee drinkers are significant purchasers of foodservice offerings beyond just coffee. “Without a good coffee program, there’s literally no hope for a robust breakfast daypart,” Mandeltort emphasized.

BEYOND BREAKFAST

As important as the morning daypart may be, it would be foolish to limit coffee sales to this daypart. After all, depending on what shifts your customers work, their “mornings” could very well be at 5 p.m. or 11 p.m.

For the coffee drinker, coffee is of utmost importance regardless of time of day, explained How To Crew retailer Ryan Krebs, director of foodservice at York, Pa.-based Rutter’s Farm Stores.

“Someone may have gotten out of bed at 9 p.m. to start work at 11 p.m. Their first cup of fresh coffee to start their day may be at 10:30 p.m. The freshness and quality of that cup is just as important to them as it is to the 6 a.m.–8 a.m. crowd,” Krebs said. “The truck driver who has to drive all night and stops for coffee at 2 a.m. still wants the best coffee available, and that’s exactly what he should receive.”

Tending to your coffee station can often bring to mind the popular metaphor, “What came first, the chicken or the egg?” (Or, in this case, the coffee or the customer?)

“We are inclined to think coffee volume declines later in the day, so we put out less coffee as the day goes on. And that means the coffee isn’t as fresh. This results in declining quality of the coffee over the course of the day,” said Pierce.

“Look at the high-volume coffee providers in our industry; they sell fresh coffee throughout the day,” he continued. “It can be done. It depends on your level of commitment.”

BRAND BUILDING 101

So, coffee can create traffic in your store. That’s not exactly breaking news. But can it turn a decent profit? The so-called “Cola Wars” in the grocery channel were famous for virtually giving product away, creating voluminous traffic in the soda aisle, along with voluminous headaches for category managers. No such correlation exists in the convenience trade, however. Our How To Crew members are unanimous in their assertion that coffee not only brings customers into your stores, but can make you a whole lot of money — if you play the right cards.

“Of course coffee can be a profit center, if done correctly and with the highest standards,” asserted Krebs. While conceding there is a small degree of loss, due primarily to throw-aways (shelf-life dates expiring and time-limit standards for brewed coffee), Krebs steadfastly maintains any perceived hit to the bottom line will be more than compensated for when one takes into the account the value added in the form of customer satisfaction.

Providing hot, fresh, high-quality coffee 24 hours a day, seven days a week, is one of the first building blocks to success for any 24-hour retailer — Brand Building 101, if you will.

“After all,” continued Krebs, “once customers find a coffee provider that gives them exactly what they want, when they want it, on a consistent basis, they will never go anywhere else. Period.”

Without question, offering your customers a variety of options in their coffee purchases (sizes, flavors, sweeteners, etc.) is one key to building a successful program.

“Yes, you must have variety,” agreed How To Crew member Joe Chiovera, principal at Dallas-based consulting firm XS Foodservice & Marketing, with prior experience at Circle-K, 7-Eleven, Sheetz and Mobil On the Run. “But you have to manage your variety or it could eat you alive.”

Such management requires a hands-on approach. Only you can determine what your customers prefer, and it’s your job to deliver. A distinct advantage c-stores have over most of the competition in the coffee category is the ability for customers to create their own cup.

“Customers can customize their coffee drinks with flavors, styles and coffee shots that suit their individual palates,” said Krebs. This may include cappuccinos, frappes, Americanos, espressos and lattes.

Before you commit to turning your coffee service into a mini-Starbucks, however, consider what your customers really want. You need to walk before you run, and run before you fly.

“We tend to spend a lot of time thinking about brewing equipment, types of cups, flavors, types of condiments and other ancillary things around the coffee bar,” noted Pierce. “Research indicates those attributes are rarely high on the consumer’s list, however.”

Rather, said Pierce, c-stores should focus on the basics: great taste, freshness, value, convenience, making sure there is always plenty of coffee in stock, speed and cleanliness. “These are the things the consumer really wants,” he relayed. “After you’ve mastered the basics, you can branch out into flavors and more condiments.”

• Never sacrifice quality by saving a few pennies on coffee that has gone beyond its shelf life. You need to recognize how important a successful coffee program is to the overall success of your foodservice operation.

CALL TO ACTION: Foodservice 201

• Consider purchasing your own equipment that will free you from embedded costs and give you the opportunity to pursue product free of contractual obligations (such as minimum purchases).

• Focus on growing your afternoon snack daypart by using specialty coffees (i.e., “affordable indulgences” such as lattes and cappuccinos).

• Take advantage of the margins that such beverages provide to support promotions in other segments, such as a free medium coffee with the purchase of eight or more gallons of gas.